Lenders Are Getting Nervous About CoreWeave. I'd Still Buy Nvidia Stock.
Bond buyers now want almost 15% to lend to a cloud company the AI chip leader has billions invested in. Should its shareholders worry?
Recent reports indicate that lenders are growing increasingly cautious about CoreWeave, a cloud company specializing in AI chips produced by Nvidia. This concern stems from CoreWeave issuing $1.25 billion in unsecured notes due in 2032 with a 9.625% coupon in June. Now, the yield on these notes has surged to nearly 15%, reflecting lenders' apprehension.
As a result, CoreWeave's shares have plummeted by approximately 15%, while Nvidia, both a supplier of chips and a shareholder in CoreWeave, has dropped about 3% to around $221. However, it appears that Nvidia's interest in CoreWeave is relatively minor compared to the chipmaker's overall earnings. Despite a nearly 2x increase in revenue during Q2 to around $2.6 billion, CoreWeave has still reported a loss on an operating basis, with interest expenses reaching $640 million, more than double from the previous year. CoreWeave's total debt stands at approximately $35.6 billion.
Nvidia owns roughly 47.2 million CoreWeave shares, worth about $4.7 billion at the time, which has since decreased to around $3.1 billion at the current price of $66 per share. Additionally, Nvidia is involved in a deal with CoreWeave worth $6.3 billion, obligating Nvidia to purchase any unused cloud capacity from CoreWeave's customers until April 2032.
Despite these ties, Nvidia's latest filing shows substantial commitments ($36 billion) with AI cloud partners and guarantees ($3.5 billion) on data center leases, amounting to a potential maximum loss of $4.7 billion. While Nvidia's operating income more than doubled to $63.7 billion in Q2 2027, CoreWeave's purchases account for only around 8% of Nvidia's sales.
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